LIPSKY et al v. CONNECTICUT GENERAL LIFE INSURANCE COMPANY et al

Filing 47

OPINION. Signed by Judge William J. Martini on 5/30/14. (gh, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

RICHARD LIPSKY, ROSELAND
AMBULATORY SURGERY CENTER, LLC,
and MHA, LLC d/b/a Meadowlands Hospital,

Civ. No. 2:13-00105 (WJM)

OPINION
Plaintiffs,
v.
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY, PHIL MANN, and
JOHN DOES 1 through 100,
Defendants.

WILLIAM J. MARTINI, U.S.D.J.:
Plaintiffs Richard Lipsky, Roseland Ambulatory Surgery Center, LLC, and MHA,
LLC d/b/a Meadowlands Hospital filed suit alleging that Defendant Connecticut General
Life Insurance Company, and its spokesman, Defendant Phil Mann, committed
defamation when Mann accused Roseland of fraud in a published newspaper article.
Plaintiffs’ Amended Complaint was dismissed with prejudice on September 24, 2013 by
Judge Dennis Cavanaugh, to whom the case was then assigned. On October 22, 2013,
Plaintiffs moved to reopen the case and file an amended pleading pursuant to Federal
Rules of Civil Procedure 59(e) and 15(a)(2). This decision addresses that motion, along
with Defendants’ cross-motion to re-open the case pursuant to Rule 59(e). There was no
oral argument. Fed. R. Civ. P. 78(b). For the reasons set forth below, Plaintiffs’ motion
is GRANTED, and Defendants’ motion is DENIED.
I.

BACKGROUND
A.

Plaintiff File Their Original Complaint

Plaintiff Roseland Ambulatory Hospital (“Roseland”) is an ambulatory surgical
center in Roseland, New Jersey. Plaintiff MHA, LLC is a New Jersey hospital. Plaintiff
Richard Lipsky owns Roseland and MHA. Defendant Connecticut General Life
Insurance Company (“CGLIC”) is an insurance company. Defendant Phil Mann is a
spokesman for CGLIC.
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The facts of this case are closely related to a separately filed case called
Connecticut General Life Insurance Company v. Roseland Ambulatory Surgery Center,
LLC (“Connecticut General”), filed on the docket as civil action number 12-5941.
Connecticut General concerns a practice called cost-sharing. For present purposes, costsharing is a practice that allows insurers to incentivize their insureds to get care from innetwork providers. Under cost-sharing, patients who see an out-of-network provider
have to pay some of the cost of care from their own pocket. These costs take the form of
co-insurance payments and deductibles (for simplicity, the Court refers to these out of
pocket payments together as “co-insurance”). In Connecticut General, CGLIC is
alleging that Roseland, an out-of-network hospital, failed to charge co-insurance to
CGLIC insureds. CGLIC argues that waiving co-insurance allowed Roseland to attract
patients—and out-of-network reimbursements—that Roseland otherwise would not have
gotten. In its pleading, CGLIC takes the position that Roseland’s practice violated
ERISA and amounted to common law fraud.
On November 16, 2012, after CGLIC filed Connecticut General, an article about
the Connecticut General case (the “Article”) was published on the The Record’s website,
northjersey.com. The Article, which is the subject of the instant case, was published
under the headline, “Cigna Subsidiary Suing N.J. Surgical Center for $6.6M.” The article
included the following language:
There are a number of facilities and doctors in New Jersey that pursue an
out-of-network business model,” said Phil Mann, a Cigna spokesman. That
strategy is responsible for “driving up claim costs, with significantly higher
charges than those billed by in-network doctors and facilities,” he said.
“The waiver of costsharing as a routine business practice is deceptive and
fraudulent. Providers who engage in this are driving higher costs for all
New Jersey consumers.”
After the Article was published, Plaintiffs filed a two-count Complaint against CGLIC in
New Jersey Superior Court alleging that Mann’s statement (“the Statement”) amounted to
defamation and trade libel. Plaintiffs subsequently amended their Complaint to name
Phil Mann as a Defendant.
B.

Defendants Remove the Action and Move to Dismiss

On January 7, 2013, Defendants removed the action to federal court, and the case
was assigned to the Honorable Katharine S. Hayden. ECF No. 1. On January 14, 2013,
the case was reassigned to the Honorable Dennis M. Cavanaugh. ECF No. 4. On
February 11, 2013, Defendants moved to dismiss the Amended Complaint. ECF No. 10.
On September 24, 2013, Judge Cavanaugh issued an opinion granting the motion to
dismiss. Because the instant motions require this Court to effectively reconsider Judge
Cavanaugh’s decision, the Court will describe Judge Cavanaugh’s decision in detail.

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Judge Cavanaugh began by addressing the elements of a defamation claim. First,
Judge Cavanaugh noted that a defamation claim could not be predicated on statements of
opinion unless the statements imply “false underlying objective facts.” Connecticut
General, 2013 WL 5354511 at *2 (quoting Lynch v. New Jersey Educ. Ass’n, 161 N.J.
152, 167 (1999)). Judge Cavanaugh explained that courts determine truth or falsity by
considering “content, verifiability, and context.” Id. (quoting Lynch, 161 N.J. at 170).
Judge Cavanaugh continued:
Content requires that we look at the nature and importance of the speech.
For instance, does the speech in question promote self-government or
advance the public’s vital interests, or does it predominantly relate to the
economic interests of the speaker? Context requires that we look at the
identity of the speaker, his ability to exercise due care, and the identity of
the targeted audience.
Id. (quoting Senna v. Florimont, 196 N.J. 469, 497 (2008)). Judge Cavanaugh noted that
even if a purportedly defamatory statement fails to explicitly name a plaintiff, the
statement can still be defamatory if “those who read or hear the [statement] reasonably
understand the plaintiff to be the person intended.’” Id. (quoting Dijkstra v. Westerink,
168 N.J. Super. 128, 133 (App. Div. 1979)).
Second, Judge Cavanaugh explained that defamation requires that a plaintiff
“communicate[] the [allegedly defamatory] statement to a third party.” Id. (quoting
Mangan v. Corporate Synergies Grp., Inc., 834 F. Supp. 2d 199, 204 (D.N.J. 2011)).
Third, Judge Cavanaugh explained that when a statement implicates a “public
concern,” a plaintiff cannot establish defamation without establishing “actual malice.”
Under the actual malice standard, a defendant must make a statement ‘knowing that [the
statement] was false or with a reckless disregard for the truth.’” Id. (quoting DeAngelis v.
Hill, 180 N.J. 1 13 (2004)).
After setting forth the elements of a defamation cause of action, Judge Cavanaugh
concluded that Plaintiffs pled the first two elements of the cause of action but failed to
plead the third element of the cause of action. Judge Cavanaugh explained:
With respect to the first element, Mann’s statement that the waiver of
costsharing is “fraudulent and deceptive” is injurious to Plaintiffs'
reputations and is not an opinion because it is capable of being verified as
true or false. As Plaintiffs argue, the underlying suit brought by CGLIC,
upon which the article is premised, is centered on the argument over
whether costsharing is fraudulent. Further, although Plaintiffs are not
specifically named in the sentence of the article that states that costsharing
is fraudulent and deceptive, the article is about CGLIC's suit against
Plaintiffs. Thus, a reasonable person could conclude that a statement made
in the article by a spokesperson of CGLIC concerns Plaintiffs. Defendants
try to evade this conclusion by pointing out that they did not write the
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article and argue that Mann simply made a generalized statement that was
not meant to implicate Plaintiffs. Defendants contend that Plaintiffs'
identities were injected into the article by someone other than Defendants.
However, Plaintiffs have set forth sufficient facts to show that the statement
concerned them, and as Plaintiffs’ allegations must be accepted true at this
stage, it is improper to dismiss the Complaint based on this argument. With
respect to the second element, the statement was clearly communicated to a
third person because Plaintiffs admit that Mann made it to a newspaper
reporter, and thus this element is satisfied.
Id. at *3 (internal citations omitted).
Next, Judge Cavanaugh held that the Statement involved a matter a public
concern. He stated:
Mann’s statement in the article contends that Plaintiffs are engaging in
fraudulent activity that is driving up costs for New Jersey consumers. This
is an issue that, if true, is of importance to many people beyond Defendants
themselves. Looking at the context of the statement further supports the
notion that it is of public concern, as Mann made it to a newspaper reporter
and thus Defendants must have known that it would be communicated to
the public.
Id.
After concluding that the Statement involved a matter of public concern, Judge
Cavanaugh held that Plaintiffs had failed to plead malice. Judge Cavanaugh wrote:
Plaintiffs allege that Defendants' statement is false and that it was made
with “hatred, ill will, evil motives, and malice.” However, nowhere in the
Complaint do Plaintiffs make a showing that Defendants made the
statement knowing that it was false or with a reckless disregard for the
truth.
Instead, Plaintiffs erroneously rely on Defendants’ alleged
motivation for making the statement. Simply stating that the statement was
made with malice without additional facts that support the notion that
Defendants knew the statement was false or had a reckless disregard for the
truth is insufficient to survive a motion to dismiss.
Id. (internal citations omitted). Because Plaintiffs failed to plead actual malice, Judge
Cavanaugh dismissed Count I, the claim for defamation. And because Count II, the
claim for trade libel, also required Plaintiffs to plead actual malice, Judge Cavanaugh
dismissed that count, as well. Id. at 4. Since Judge Cavanaugh did not specify whether
the dismissal operated with or without prejudice, the dismissal operates with prejudice as
a matter of law. See Fed. R. Civ. P. 41(b) (“Unless the dismissal order states otherwise, a

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dismissal under this subdivision (b) [governing involuntary dismissals] and any dismissal
not under this rule . . . operates as an adjudication on the merits.”).
C.

Plaintiffs Move to Re-Open the Case

After Judge Cavanaugh dismissed the Amended Complaint, Plaintiffs filed a
motion to amend. In a letter order dated October 22, 2013, Magistrate Judge James B.
Clark denied the motion as premature. ECF No. 22. Judge Clark explained that because
the Amended Complaint had been dismissed with prejudice, Plaintiffs could only file a
Second Amended Complaint if they moved to set aside or vacate Judge Cavanaugh’s
judgment under Federal Rule of Civil Procedure 59(e) or 60(b). Id.
On October 22, 2013, 28 days after Judge Cavanaugh dismissed the case,
Plaintiffs filed a notice of appeal with the Third Circuit. ECF No. 24. Simultaneously,
Plaintiffs moved to reopen this matter and file an amended pleading pursuant to Federal
Rules of Civil Procedure 15 and 59(e) (or in the alternative Rules 15 and 60(b)(6)). 1 ECF
No. 25. Plaintiffs argued that their proposed Second Amended Complaint (the “Proposed
SAC”) cured the deficiency in the “actual malice” element of the defamation cause of
action.
The Proposed SAC builds on the allegations in the Amended Complaint.
Specifically, the Proposed SAC provides additional information about the relationship
between Plaintiffs, Defendants, and a contractor called VIANT. According to the
Proposed SAC, CGLIC and Roseland did not have a direct contract with one another, but
they nevertheless entered into an agreement. Under this agreement, manifested through a
course of dealing, Roseland would submit a bill to CGLIC, which in turn would submit
the bill to VIANT. Proposed SAC. ¶ 36, ECF No. 25-2. A VIANT negotiator would
then negotiate the claim down to 60% or 70% of the “usual, customary and reasonable
rate which non-participating providers are entitled to under existing law.” Id. ¶¶ 36-37.
Plaintiffs allege that “[t]o the extent that CGLIC either directly, or through its agent
[VIANT], entered into direct contracts with Roseland, such contracts supersede and
otherwise control the relationship of the parties.” Id. ¶ 56. According to the Proposed
SAC, CGLIC’s contracts with Roseland “governed the relationship of the parties” and
did not “require[] or otherwise state[] that Roseland was required to collect coinsurance,
copayment, or other charges.” Id. Finally, the Proposed SAC alleges that CGLIC (and
Mann) should have known that Plaintiffs were permitted to waive co-insurance “because
plaintiff Roseland had contracted with CGLIC’s sub-contractor Viant to discount its
invoices by 40% of billed charges.” Id. ¶ 65.

1

The Third Circuit stayed the appeal pending resolution of Plaintiff’s motion. ECF No.

32.
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D.

Defendants Cross-Move to Re-Open the Case

After Plaintiffs moved to reopen the case and file the Proposed SAC, Defendants
filed a cross-motion to re-open the case and amend Judge Cavanaugh’s judgment
pursuant to Rule 59(e). ECF No. 36. In their motion, Defendants request that if the
Court finds that the Proposed SAC pleads actual malice, the Court should effectively
reconsider Judge Cavanaugh’s decision that the Statement was a statement of fact rather
than opinion. If the Court were to agree with Defendants that the Statement expressed an
opinion, not a fact, Defendants want the Court to re-open the case, dismiss the case with
prejudice, and allow the appeal to proceed.
On May 3, 2014, while both Plaintiffs’ motion and Defendants’ cross-motion were
pending, the instant case was reassigned to the undersigned from Judge Cavanaugh.
II.

LEGAL STANDARD

“After judgment dismissing the complaint is entered, a party may seek to amend
the complaint (and thereby disturb the judgment) only through Federal Rules of Civil
Procedure 59(e) and 60(b).” Burtch v. Milberg Factors, Inc., 662 F.3d 212, 230 (3d Cir.
2011) (internal citations and quotation marks omitted). Where, as here, a party seeks to
amend a pleading within 28 days of the entry of judgment, the party must proceed under
Rule 59(e). Id. at 230 n.7.
“Generally, motions for reconsideration under Rule 59(e) must rely on one of the
following three grounds: (1) an intervening change in controlling law; (2) the availability
of new evidence; or (3) the need to correct clear error of law or prevent manifest
injustice.” Id. (citation and internal quotation marks omitted). “[W]here a timely motion
to amend judgment is filed under Rule 59(e), the Rule 15 and 59 inquiries turn on the
same factors.’” Id. (quoting In re Adams Golf, Inc. Sec. Litig., 381 F.3d 267, 280 (3d Cir.
2004)). “The Rule 15(a) factors include ‘undue delay, bad faith, prejudice, or futility.’”
Id. (quoting Adams Golf, 381 F.3d at 280 (citation omitted)).
III.

DISCUSSION

Plaintiffs argue that the Proposed SAC cures the deficiency in the “actual malice”
element of the defamation cause of action addressed by Judge Cavanaugh. Accordingly,
Plaintiffs move under Rules 15 and 59(e) to reopen the case and file the Proposed SAC.
Defendants argue that it would be futile to proceed with the Proposed SAC because the
Proposed SAC fails to plead actual malice. In the alternative, Defendants argue that if
the Proposed SAC satisfactorily alleges actual malice, Plaintiffs’ claims still fail because,
contrary to Judge Cavanaugh’s ruling, the Statement was an expression of opinion rather
than fact. The Court addresses these arguments in turn.

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First, the Proposed SAC alleges actual malice. 2 In the Proposed SAC, Plaintiffs
charge that Defendants committed defamation when Mann told a journalist that waiving
co-insurance amounted to fraud. Plaintiffs further allege that Defendants knew or should
have known that Plaintiffs were not engaged in a fraud because (a) there was no explicit
obligation to bill for co-insurance under the course of dealing between CGLIC and
Plaintiff; and (b) Plaintiffs were not obligated to charge co-insurance to Defendants’
insureds because Plaintiffs provided Defendants with substantial discounts, thereby
allowing Defendants to recoup or partially recoup the out additional out-of-network costs
that Defendants incurred because Plaintiffs waived the co-insurance obligation. The
Court finds that these allegations are sufficient to allow discovery on whether Mann
knowingly or recklessly uttered a falsehood, and therefore acted with actual malice.
Next, since the proposed SAC adequately pleads actual malice, the Court must
address Defendants’ argument that Judge Cavanaugh was wrong when he decided that
the Statement was an expression of fact rather than opinion. Defendants’ argument is not
persuasive. Indeed, it is difficult to understand how Defendants can maintain that the
fraud charge was an expression of opinion given Defendants’ concession that fraud is “a
legal issue that this Court will have to decide[]” in the related matter, Connecticut
General. Opp. Br. at 14, ECF No. 37; see also id. (“Roseland contends that cost-share
waiver is not fraudulent. Indeed, if Roseland is correct on this point, the statement that it
commits cost-share waiver will be ipso facto not defamatory) (emphasis in original).
Next, Defendants argue the Statement did not defame Roseland because the
Statement was a general comment about an industry practice. While Defendants are
correct that the Statement refers generally to industry practices, the Statement was
published under the headline “Cigna Subsidiary Suing N.J. Surgical Center for $6.6M.”
That could lead a reader to conclude that Defendants were speaking about Plaintiffs. As
Judge Cavanaugh noted, a plaintiff can prevail on a defamation claim even if a
purportedly defamatory statement fails to explicitly name a plaintiff, so long as the “those
who read or hear the [statement] reasonably understand the plaintiff to be the person
intended.’” Connecticut General, 2013 WL 5354511 at *2 (quoting Dijkstra, 168 N.J. at
133).
Accordingly, the Court finds that the new allegations in the proposed SAC
sufficiently allege actual malice. In addition, the Court finds that Judge Cavanaugh
correctly ruled that the Statement is an expression of fact, not opinion. It follows that
Plaintiffs have alleged a defamation claim for purposes of the motion to dismiss. As
such, it would not be futile to allow Plaintiffs to file the Proposed SAC and allow this
case to proceed to discovery.

2

Plaintiffs and Defendants disagree about whether Plaintiffs need to plead actual malice in this case.
Because the Court finds that Plaintiffs have successfully pled actual malice, the Court does not have to resolve this
disagreement.
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IV.

CONCLUSION

For the above stated reasons, the Court will GRANT Plaintiff’s motion to reopen
the case and file the proposed SAC pursuant to Federal Rules of Civil Procedure 15 and
59(e). The Court will DENY Defendants’ cross-motion under Federal Rule of Civil
Procedure 59(e). An appropriate order follows.
/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: May 30, 2014

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